Mining expected to drive Mozambique’s economic recovery

Mozambique’s economic growth is expected to recover slightly at a rate of 4.2% this year, supported almost exclusively by the mining sector, after reaching the lowest value in the last 15 years in 2016, according to the Economist Intelligence Unit (EIU) in its latest country report.

EIU analysts also wrote that the coal industry will expand rapidly due to rising international prices compared to 2015/16, robust demand from India, the largest export market for Mozambique, as well as the efforts made by mining companies to reduce production costs.

The growing production of graphite in the province of Cabo Delgado, as well as precious stones, notably rubies also extracted in that province of northern Mozambique, will also support economic growth.

However, fiscal pressure, lack of liquidity in the system and high inflation will curb domestic demand and political uncertainty will keep investment low.

After 2017, Mozambique’s economy is expected to accelerate to average growth of 5.3% in 2018-2021, with a minimum of 4.8% in 2018 and a maximum of 5.5% in the last year of the interval.

The EIU document noted that fiscal consolidation will limit the expansion of services and the civil construction sector traditionally dependent on government contracts, but adds that some investment may be expected to occur by 2018 as business owners regain confidence.

The expansion of cash crops will allow the expansion of the agricultural sector, but growth will be hampered by poor logistical conditions.

The EIU added that the exploration of natural gas reserves discovered in the Rovuma basin will be one of the driving forces behind the development of the country’s economy.

“Although the production of liquefied natural gas does not start within the forecast period (up to 2021), given the complexity of the projects, the preparation tasks will support economic growth from 2018,” says the EIU in its latest report about Mozambique.